new york city

I live in a central part of Manhattan and work in more or less the center of the emerging internet district (21st & 6th). Amazingly, one of our biggest challenges being a NYC startup has been getting reliable internet access. At home I have one option – Time Warner cable – and the service is down frequently (sometimes for days – I’ve set up a backup 3G network it happens so often). Perry Chen (cofounder/CEO of Kickstarter) lives next door and we share internet and sadly our main topic of email conversation is “Is your internet working?” At work the situation is far worse. Here’s the description of our experience from my Hunch cofounder Tom Pinckney:

We’re located on 21st between 6th and 5th aves and have had a very difficult time getting reliable internet access for our office. We’re frankly not particularly price sensitive on this given how critical fast low-latency access is for our programmers. When our internet access is down our programmers cannot be productive and our site can’t be monitored — we’re helpless and twiddling our thumbs. Every hour of no internet access is about $1,000 of wasted salary across all of our employees.

We’ve tried wireless WiMax from TowerStream, ethernet-over-copper from Megapath, T1s from Verizon, DSL from Verizon and cable modem access from Time Warner Business Services. Verizon Fios is not available. Verizon and Megapath could literally never get working lines installed for our building despite months of effort. The WiMax service suffered high latency and weather outages every time it rained hard. The Time Warner cable modem service has gone weeks with hour or two outages per day.

By my last count, there are 5 internet startups on our block alone. The situation is so bad someone set up a Twitter account so we could all go to our iPhones and lament whenever the internet is down.

It’s embarrassing how bad internet access in Manhattan is. As a side note, I think it undermines the arguments by people who claim there is actual broadband choice (e.g. regarding the net neutrality debate).

Here’s what I think NYC needs to become a serious, long-term startup hub:

1) Some extremely successful startups. We need PayPals – companies that spin out boatloads of talented entrepreneurs and “smart money” angel investors. Big successes also reinforce the “culture of equity” that is so strong in California – the idea that owning options in a startup is the best path to financial and career success.

2) More web product design talent. This is the scarcest talent of all (more so than engineering). NYC has perhaps the best design community in the world, but most of the designers are trained in non-web design fields (e.g. print design). Most of the good design schools don’t emphasize web product design (some exceptions – e.g. my friend Zach Klein taught an excellent class at the School of Visual Arts last semester on web product design). NYU’s ITP stands out as a program that focuses on the intersection of design and technology (e.g. the Foursquare team went to school there). CMU’s HCI program and MIT’s Media Lab are also great. Other schools need similar programs.

3) More engineers. However, this doesn’t mean we need more engineering schools (although that wouldn’t hurt). Like Silicon Valley, NYC is populated mostly by people who moved here from other places. For the right opportunity, it isn’t hard to convince, say, recent MIT grads to move to NYC. The problem is that NYC startups are basically unknown to students at MIT, CMU, Penn, and even (shockingly) to engineering students at NYU and Columbia (big props to HackNY for trying to fix this). East Coast CS students also view startups as a much riskier path than they actually are. I say this having been at dozens of events with East Coast students over the last year or so talking about startups. I’m constantly amazed that most of the students simply don’t realize startups are a viable option. What we have is primarily a marketing, not a supply, problem.

4) High-speed internet throughout all the “startup areas” of Manhattan (Flatiron, Meat Packing, Soho etc) and Brooklyn (Williamsburg, Dumbo, etc). It’s amazing that we have such a fundamental infrastructure problem in a city as advanced as NYC, but I can’t tell you how many startups I know that struggle to get working high-speed internet access that has solid uptime.

5) More marquee tech companies opening large tech offices here. Google has something like 1500 engineers here. This adds a lot of vibrancy to the tech culture and attracts more engineering and design talent to the city.

Some things we don’t need:

1. Government or university organized events that introduce entrepreneurs to other entrepreneurs. There seems to be one such event each week. Entrepreneurs are by nature very good at meeting one another and it’s a small enough community that pretty much everyone already knows each other anyways.

2. Expensive projects like big engineering universities. Again, the more engineers and CS programs in the US the better (even better yet we need more CS majors – which probably means more CS education in high school and earlier), but I can think of far more productive ways to spend $100M to help the NYC startup and tech world.

3. Lower rents. No doubt the rents are too damn high and lower rents would be great. I’ve been living here since college when my room for one year was a hallway in a friend’s apartment. I sympathize with people who say this. But the idea that NYC is unaffordable on a typical startup salary is a complete myth. You can rent a decent place in a cool part of town on a typical startup salary. As to commercial space, for venture-backed startups the difference between rent in NYC and rent in other cities is generally the difference between spending, say, 3% versus 4% of your total financing on rent.

4. More early-stage investment capital. There are plenty of smart angels, seed funds, and VCs who are either based here or are based elsewhere but actively invest here.

Most of all what we need is for our tech and startup scene to reach critical mass (and to sustain that critical mass even if a tech downturn comes). Facebook wasn’t started in Californa and lots of future big successes will be started in all sorts of random places. NYC needs enough tech critical mass that the next Mark Zuckerberg seriously considers relocating to NYC.

There is, first, the New York of the man or woman who was born here, who takes the city for granted and accepts its size and turbulence as natural and inevitable.

Second, there is the New York of the commuter—the city that is devoured by locusts each day and spat out each night.

Third, there is the New York of the person who was born somewhere else and came to New York in quest of something. Of these three trembling cities the greatest is the last—the city of final destination, the city that is a goal. It is this third city that accounts for New York’s high-strung disposition, its poetical deportment, its dedication to the arts, and its incomparable achievements. Commuters give the city its tidal restlessness; natives give it solidity and continuity; but the settlers give it passion. And whether it is a farmer arriving from Italy to set up a small grocery store in a slum, or a young girl arriving from a small town in Mississippi to escape the indignity of being observed by her neighbors, or a boy arriving from the Corn Belt with a manuscript in his suitcase and a pain in his heart, it makes no difference: each embraces New York with the intense excitement of first love, each absorbs New York with the fresh eyes of an adventurer, each generates heat and light to dwarf the Consolidated Edison Company.

I’ve written a few times about what seems to be an exploding tech scene in NYC. This is sometimes interpreted as arguing that NYC is a better place to start a company than the Valley. Most recently, Matt Mireles seems to be addressing people like me with his critique of the NYC startup scene (he makes some good points as does Caterina Fake in her response).

I’ve never meant my arguments to be about where it is better to start a company. California is a phenomenal place to start a tech company. NYC is a great place as well. (Note to Matt – it’s hard for first time founders everywhere). To me, the important question isn’t which place is better, but rather how we import the things that make the Valley great into NYC. As I said last year:

New York City has many of the same strengths as Silicon Valley – merit-driven capitalism, the embrace of newcomers and particularly immigrants, and a consistent willingness to reinvent itself. Silicon Valley will always be the mecca of technology, but now that people here are getting back to, as Obama says, making things, New York City has a shot at becoming relevant again in the tech world.

I spent the past week in California and had the honor of meeting some legendary venture investors. I was deeply impressed: they are legends for a reason. Of course, they are incredibly smart and hard working and all of that, but most impressively, it was clear that they truly believe in making big bets on ambitious, seemingly wacky ideas to try to change the world. Every VC has this rhetoric on their website, but – at least in my experience – most just want to make incremental money on incremental technologies. (Side note: I noticed that the more powerful the VC, the more likely they were to pay close attention, show up on time, and not bring phones/computers into meetings. I guess when you are changing the world, emails can wait an hour for a response).

California should be NYC’s role model and ally. The enemy should be people and institutions who make money but don’t actually create anything useful. In NYC, this mostly means Wall Street, along with the Wall Street mindset that sometimes infects East Coast VC’s (emphasis on financial engineering, needing to see metrics & “traction” vs betting on people and ideas, etc).

Matt should do what’s best for his company. God knows it’s hard enough doing a startup – you don’t need to carry the weight of reinvigorating a region on your back as well. That might mean moving to California. Meanwhile, forward-thinking investors and founders in NYC will continue trying to make things that change the world – in other words, trying to make NYC more like the Valley.

Howard Lindzon was nice enough to have me on his Stocktwits.tv show recently. For those who don’t know Howard, he writes a fantastic blog. He writes in such an irreverent way it’s easy to overlook the wisdom behind what he says. My favorite recent Howard-ism was, talking about investing, “I like to look outside and see my [investments].” I take this to mean he likes to invest in things he understands, can touch, go visit, etc. This is probably the single best piece of advice in order to have survived the recent financial crisis. Fancy things like CDOs, Auction-Rate Securities, etc turned out to function much differently than advertised. Diversification across asset classes (CAPM etc) turned out to be useless: when things got bad, correlations went to 1. One reason I like investing in startups is you can go visit them – they are something tangible and understandable.